BCG Transform Index:
UKFinancial study on sector performance
APRIL, 2023

Disclaimer
The basis for this study is a data set extracted from Capital IQ for companies listed on European stock
exchanges with a minimum revenue of €500 million
Companies from the financial industry and Ukraine/Russia are excluded

The analysis covers data from 2018 through the last twelve months (LTM)
LTM refers to available data from Q4-2021 through Q3-2022
The ranking is based on a comparison with other industries within the same country
Please note that the statements made relate specifically to this data set1Copyright © 2023 by Boston Consulting Group. All rights reserved.

Our data set includes 1,373 European companies, of which 244 are from the UK, that meet these selection
criteria•

Most resilient
sectors

Most impacted
sectors

Rankingcompared with
European average
BCG
recommendation
Source: BCG Analysis

The Metals & Mining sector scores highly across all dimensions, capitalizing on the surging demand after thepandemic (strong economic growth) and price increase from constrained supply in recent past•

Although the Energy sector exhibits poor financial stability, it shows high profitability and solvency, withproducers benefitting from supply constraint and rising prices•

The Consumer sector demonstrates strong solvency and financial stability with slight struggles in theprofitability dimension due to potential reduction in consumer spending in times of high inflation•

The Industrials sector grapples particularly with issues concerning profitability and financial stability,
potentially also impacted by leaving the EU•

The Automotive sector struggles primarily in financial stability and profitability with significantly lower
margins compared with the 2018 baseline due to rising input prices and car sales slowly declining•

The pandemic and current challenges continue to significantly impact the Leisure and Tourism industry,
which struggles across all dimensions, with its EBITDA margins not fully recovered•

The Consumer sector has been more resilient in the UK due to strong consumer confidence, favorable
exchange rates, and established brand names, among other contributing factors•

The Automotive industry in the UK has been severely affected by the semiconductor shortage, low
automobile demand after the pandemic, and new trade rules, with the EU its primary passenger car export
destination

In the context of persistent crises, companies cannot continue to remain in a reactive firefighting mode, butrather must focus on proactively seizing opportunities supported by an adaptable cost structure (that fitsearnings), a strong financial position, and an adjusted go-to-market strategy. In a nutshell: Resilience is key tobeing successful

Take-aways
Operational view
Post-pandemic, revenue is on the rise
across all sectors, and for more thanhalf of the sectors EBITDA margins
have returned to pre-Covid levels.
However, the momentum for profit
growth is now waning, with EBITDA
margins slightly declining in LTM—atrend that is evident in the European
area as wellSolvency
The proportion of UK companies withnegative free cashflow has risen
steeply in LTM and is 24%, which is inline with the European average of 27%

Financial stability
In 2019, the net debt increased
significantly and has remained at ahigh level compared with the baseline
in 2018. Unlike other European
countries, there has not been muchchange in the proportion ofinvestment-grade debt since 2018. InLTM, 60% of the debt is investmentgrade, which is a higher percentage
than the European average of 45%
2Copyright © 2023 by Boston Consulting Group. All rights reserved.

Sector performance and resilience in the face of past andprevailing crises

Sectors providing fundamental input for industrial production proved to be themost resilient industries

1234
5Metals & Mining
Metals & Mining

Other
Chemicals

EnergyEnergyConsumer
Automotive

Health Care
OthersProfitability

Solvency

Financialstability

1071027

710623

99321

56920

838

19

SUM

Industry position in the European ranking
Note: A ranking was assigned to each industry based on its performance in three dimensions. The detailed ranking methodology can be found in the appendix; A total score of 21 points isexhibited by both Energy and Other. However, since Energy performs notably better in profitability, it is ranked higher
Source: Capital IQ, BCG analysis

3Copyright © 2023 by Boston Consulting Group. All rights reserved.

Points given for industry performance in three dimensions

Leisure and Tourism remains the industry that has been most severely affected,
Automotive and Industrials perform worse than in the European ranking

678910ChemicalsIndustrials

TMT
Health Care

Industrials
Consumer

Automotive
TMT

Leisure & Tourism
Leisure & Tourism

Profitability

Solvency

Financialstability

637163561445413182112114

SUM

Industry position in the European ranking
Note: A ranking was assigned to each industry based on its performance in three dimensions. The detailed ranking methodology can be found in the appendix.
Source: Capital IQ, BCG analysis

4Copyright © 2023 by Boston Consulting Group. All rights reserved.

Points given for industry performance in three dimensions

Operational view | While overall revenues and profitability have surpassed prepandemic levels, there are still sectors that have not yet fully recovered
EBITDA margin in the UK in %, 2018–LTM

-0.4%

17.9%

-22.8%
1,669
25

1,663
26

389

409

20

21

698
69

162
45
81
114
66
2018

1,784
31637

173
86
70

79
47116

2019

Note: LTM = LTM Q3-2022
Source: Capital IQ, BCG Analysis

1,283
21

1,461
24419

403

1926
319

437

455

5%

2215%
13%
14%

651

26%

10014%

9%

15%
15%

4%
11%

14%

15%
15%

32%
10%2%
9%

30%
9%

8%

150
75 37
109
65

83
156
34
113
10967

2020

2021

LTM

Automotive

Chemicals

Health Care

Leisure and Tourism

TMT

Consumer

EnergyIndustrials

Metals & Mining, Const. Mat.

Other

78

173
114
78

47
114

34%

14%

27%

2018

36%
29%
14%
2019

-0.9%

8.5%

-0.9%

41%

14%

28%

2020

3%
15%
13%
18%

12%
21%

26%

29%

8%

10%
12%

49%

14%

2%

26%

2021

15%

10%

40%

14%

26%

LTM

5Copyright © 2023 by Boston Consulting Group. All rights reserved.

Revenue in the UK in bn EUR, 2018–LTM

Solvency | After a steep rise in LTM, 24% of British companies have negative
FCF in LTM, which is slightly below the European average of 27%

2021

244

963

791%

89%

94%

100%

9%

11%

6%

0%

244

963726

14

43

93%

88%

7%

12%

261443

1265%

71%

86%

83%

35%

29%

14%

17%

77%
23%

1267%
33%

1432

2493%

100%

100%

7%

0%

0%

1432

2488%

96%

13%

4%

22%
70%

76%

LTM

86%

64%

78%
30%

24%

14%

36%

Total

Europeanbenchmark fornegative FCF in LTM
Positive FCF

27%

Automotive

Consumer

Chemicals

EnergyHealth Care

Industrials

Leisure andTourism

Metals &Mining,
Const. Mat.

TMT

Other

48%

28%28%

31%

21%

29%

16%

32%

22%

16%

Negative FCF

Source: Capital IQ, BCG Analysis

6Copyright © 2023 by Boston Consulting Group. All rights reserved.

Distribution of companies with negative/positive FCF in 2021 and LTM

Financial stability | Net debt has been slightly rising in LTM with an increased
share of sub-performing debt since 2021
Net debt by rating1 in the UK in % and bn EUR, 2018–LTM

Net debt in the UK in billion EUR, 2018–LTM-1.7%609
491
3126
5628

34158

15966162
431922732
1319588

201

212
54

2.7%

269604

44156

166

66168

177

4541

5836

23461962%2312616

52%

56%

60%

9%

4%

35%

36%

LTM

59%

14%

115

111

98

2286
252221222018

2019

2020

2021

LTM

Automotive

Chemicals

Health Care

Leisure and Tourism

TMT

Consumer

EnergyIndustrials

Metals & Mining, Const. Mat.

Other

84605

504

59

35637

15%

22%

27%

23%

25%

2018

2019

2020

2021

Investment Grade

Mid-Grade

Sub-Performing

1. The ratings are based on the Net Debt/EBITDA leverage measure. Debt with a Net Debt/EBITDA ratio below 3.5 is considered investment grade, while debt with a ratio between 3.5 and
4.5 is classified as mid-grade. If the ratio exceeds 4.5, it is considered sub-performing debt. If EBITDA is negative, net debt is automatically classified as sub-performing.
7
Source: Capital IQ, BCG Analysis

Copyright © 2023 by Boston Consulting Group. All rights reserved.

24.0%

8Copyright © 2023 by Boston Consulting Group. All rights reserved.

Appendix

BackupProfitability

Solvency

Financial stability

Total ranking

The profitability ranking isbased on EBITDA growthbetween 2019 and LTM, with
the industry having the lowest
EBITDA growth being assigned
the fewest points (1) and theindustry with strongest EBITDA
growth the most points (10)The solvency ranking is basedon the growth sector's overall
cash account LTM, thepercentage of companies withgrowth in cash LTM, and theinterest coverage ratio, withthe worst overall performanceassigned the fewest points (1point) and the strongest themost points (10)The financial stability
ranking is based on the LTM
equity ratio and net debt rank,which is determined by
the proportion of mid-grade
and sub-performing debt, withthe worst overall performanceassigned the fewest points andthe strongest the most points

Once the points for eachdimension have been
determined, a total ranking
score is calculated by summing
the points of each dimension.
The highest sum of points
indicates the best
performance, the lowest thepoorest performance

9Copyright © 2023 by Boston Consulting Group. All rights reserved.

Ranking methodology

Backup

Number of UK companies within each industry in the underlying database

244

63
4332

26
9

Automotive Consumer Chemicals

Source: Capital IQ, BCG Analysis

147

EnergyHealthCare

Industrials

1214

LeisureandTourism

Metals& Mining,
Const. Mat.

TMT24

• Companies listed
on European stock
exchange with atleast €500M
revenues• Financial industry
and companies
from Ukraine andRussia excluded

Other

10Copyright © 2023 by Boston Consulting Group. All rights reserved.

Selection criteria:

Backup

The data set consists of European companies that meet the selection criteria
for this study
1,373
244

105
78

28

39

4335
27 12 3238
165632125551 45
21158

138
Total

Count ofcompaniesthat meetselection
criteria

68

95

Source: Capital IQ, BCG

11Copyright © 2023 by Boston Consulting Group. All rights reserved.

159 164

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